Federal Regulator Tip-Toes Into Reporting of International Wire Transfers (updated 1/18)

By Andrew Cochran

The Financial Crimes Enforcement Network of the U.S. Treasury (FinCEN) announced today that they had completed a study of the feasibility of mandating the reporting of cross-border wire transfer data by financial institutions, in accordance with the Bank Secrecy Act (BSA). The study concluded that such reporting is technically feasible and might be valuable to efforts to combat money laundering and terrorist financing, but takes additional resources before full implementation. The study was ordered in Section 6302 of the Intelligence Reform and Terrorism Prevention Act of 2004. I first posted on this issue in April, 2005, following the first move by FinCEN to initiate the study. You can download the entire study from the FinCEN website (large Acrobat file).

Since the passage of the act, some of the leaders at FinCEN and the Treasury Department who pushed for a comprehensive program have left, and successors have taken a more cautious view of the agency's capabilities. The study reflects the limited scope of the program as now envisioned. To begin with, FinCEN proposes to limit the reporting mandate to those “First In/Last Out” institutions that send a wire transfer directly to a non-U.S. financial institution or receive such a transfer directly from a non-U.S. financial institution. To quote the study, "This approach aims to capture a funds transfer instruction at the point at which it crosses the U.S. border." The "American Banker" trade magazine today quotes a senior FinCEN adviser to the effect that this scope would limit the reporting of international wire transfers to about a dozen large institutions. The study also notes that much international transfer information is already available through other channels, including the SWIFT program that was the subject of press disclosures and posts here last year. FinCEN also now estimates that it will take over three years to implement the reporting mandate, much longer than the December 2007 deadline set in the 2004 intel reform act.

Last year I posted on the efforts by the banking community to limit the imposition of new BSA reporting and compliance burdens. Legislation pushed by the U.S. House Financial Services Committee (where I worked for almost 3 years) to ease reporting burdens was supported by the industry and passed the House, but failed in the Senate due to the objections of law enforcement (edited 1/18). Now that the leadership of both houses of Congress has changed, it will be interesting to see how the major banks which would implement the reporting requirement and the new Congressional majority will react to the study. Reporting more information on wire transfers would aid counterterrorism efforts, but with an extra cost to U.S. institutions that will not be shared by other countries' financial institutions which are not required to so report their transfers. This is a tip-toe into the reporting of international wire transfers; the debate over its utility and burden has only begun.

UPDATE, 1/18: The American Bankers Association issued a statement today expressing doubts over the course of action. “In light of FinCEN’s breathtaking finding that the new program could result in half a billion new financial reports a year, it is essential that we observe the congressional mandate that costs, benefits, and feasibility be thoroughly examined before we proceed toward implementation." And a slightly revised version of the BSA regulatory relief bill that passed in the House last year, but died in the Senate, passed in the House last week. A knowledgeable Senate source is skeptical of the bill's chances this year absent acquiescence by law enforcement.

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